Finance term

General Liability Insurance

Also known as: GL insurance, commercial general liability, CGL

Definition

General liability insurance covers a business against third-party claims of bodily injury, property damage, and personal/advertising injury. It is required by most commercial leases and client contracts, and is typically the first insurance policy a new business purchases.

Detailed explanation

General liability (GL) insurance protects the business when a third party is injured on your premises or as a result of your operations, when your business operations damage someone else's property, or when someone sues over advertising claims or personal injury (defamation, copyright infringement in advertising). It does not cover the business owner's own injuries, damage to business property, professional errors, or employee injuries (those require separate policies).

GL policies have two key limits: (1) Per-occurrence limit — the maximum the insurer pays for a single claim (common limits: $1M per occurrence). (2) Aggregate limit — the maximum for all claims during the policy period (typically $2M annual aggregate for a $1M/$2M policy). Premium varies widely by business type, revenue, number of employees, and claims history — a low-risk consulting firm may pay $400-800/year; a construction company $3,000-20,000+/year.

GL insurance is typically required by: commercial lease agreements (landlords require proof of coverage before occupancy), client contracts (especially in B2B services, construction, staffing), event venues, and licensing bodies. The U.S. Small Business Administration recommends GL coverage as foundational protection in its small business resource guides (https://www.sba.gov/business-guide/launch-your-business/get-business-insurance).

Business Owner's Policy (BOP): small businesses commonly bundle GL + commercial property insurance into a BOP, which is typically cheaper than buying the two policies separately. BOPs have eligibility criteria (business size, revenue, class of business).

◈ Worked example

Retail store: customer slips on wet floor, breaks wrist — GL covers medical bills, legal defense, and settlement up to the per-occurrence limit
Freelance designer: advertising injury claim — client claims the logo design infringed a competitor's trademark. GL covers legal defense costs.
Commercial lease requirement: landlord requires $1M/$2M GL certificate before tenant occupancy — standard for virtually all commercial leases

Common questions

The most-asked questions about General Liability Insurance — answered straightforwardly.

How much general liability insurance does a small business need? +

The most common small business GL policy is $1M per occurrence / $2M aggregate ($1M/$2M). Higher-risk businesses (construction, restaurants, healthcare) or those with high-traffic locations often carry $2M/$4M. Review your commercial lease — landlords typically specify a minimum limit. Clients and contracts may also specify minimums.

Does general liability cover employee injuries? +

No. Employee injuries are covered by workers' compensation insurance (a separate, state-mandated policy). GL covers third-party bodily injury — injuries to customers, vendors, visitors, or members of the public on your premises or caused by your operations. Your own employees' on-the-job injuries fall under workers' comp.

Is general liability insurance required by law? +

Generally no — GL is not state-mandated for most businesses (unlike workers' comp and auto liability). However, it is practically required by contractual obligations: commercial leases, client contracts, and licensing agreements typically require proof of GL coverage. Some state contractor licensing boards require GL as a condition of licensure.

General Liability Insurance

Detailed explanation

Common questions

Further reading

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